Muted criticism on DirecTV bid

AT&T is not used to flying under the radar, but that is exactly what is happening in Washington with the company’s $48.5 billion bid to buy DirecTV.

A deal that would combine the nation’s biggest telephone company and the nation’s biggest satellite TV provider seems like it would generate a lot of noise from public interest groups because it eliminates a major player in the pay-TV marketplace. But instead, critics of industry consolidation are focusing on Comcast’s $45 billion play for Time Warner Cable. Just last week, Comcast grabbed headlines when it accused companies opposing the acquisition of “extortion” — or attempts to gain concessions in exchange for either their silence or support of the deal.

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While both mega-deals come with nearly the same price tag, there is a perception that Comcast’s purchase has larger implications — particularly for Internet service, a key offering as more people gravitate to online content and streaming video.

“The AT&T deal is probably benefiting from the fact that it’s happening at the same time as the Comcast merger,” said Paul Gallant, managing director of Guggenheim Securities. “The Comcast merger is drawing more fire around the issue of control of broadband. AT&T-DirecTV has more to do with the TV market than broadband.”

If AT&T’s bid for DirecTV wins regulatory approval, it would immediately turn the telecom giant into a major player in the television business. AT&T has an existing TV offering called U-verse, a fiber-based service with about 4 million subscribers, but buying DirecTV would add nearly 20 million viewers to the company’s portfolio.

Like all major telecommunications deals, the AT&T-DirecTV deal must win regulatory approval from the Justice Department and the Federal Communications Commission. It’s unclear where the review stands at Justice, but the FCC has set Oct. 16 as the deadline for AT&T to reply to opponents. Earlier this month, the FCC sent a list of questions to both AT&T and DirecTV, seeking additional information on the companies’ relationship with sports leagues, broadband offerings, video competition and the treatment of Internet access service.

The deal has drawn opposition from public interest groups like FreePress and Public Knowledge, but the criticism has been somewhat muted as the groups devote the lion’s share of their attention to Comcast-Time Warner Cable and the fight over net neutrality rules at the FCC. Some consumer advocates say AT&T was well aware of this dynamic when it announced its deal.

“AT&T had this in the works for a while and intentionally decided to jump when Comcast did,” said Free Press Policy Director Matt Wood. “In some cases, it’s a matter of resources. We’re opposing both of them, but it’s a stretch for us.”

The Comcast deal — which would combine the nation’s No. 1 and No. 2 cable companies — has also struck a chord with the public in a way not seen with AT&T’s transaction. The FCC has received more than 60,000 public comments on the Comcast merger, dwarfing the 14,000 comments it’s received on the AT&T deal.

“From a public perspective, people really hate Comcast,” explained Public Knowledge Senior Vice President Harold Feld. “They may dislike AT&T and they may not be fans of DirecTV, but they really, really hate Comcast.”

AT&T says adding DirecTV would allow it to better compete for consumers who want a broadband-video bundle; the company would be able to offer a “triple play” of phone, Internet and video service. The company says DirecTV and its subscriber base would give it the scale to get better deals on video programming.

To sweeten the deal for regulators, AT&T has committed to expand broadband to 13 million underserved rural households and fiber to 2 million households within four years after the deal closes. The companies also say they would honor the FCC’s 2010 open Internet rules for three years and offer stand-alone broadband and video services for three years after the merger closes.

“As with any merger, we expect a thorough review of our transaction. As evidenced by the comments filed in the proceeding, many have recognized its benefits, particularly the expansion and enhancement of high-speed broadband to 15 million customers, primarily in rural communities,” an AT&T spokesman said. “And, for those who have raised issues, we look forward to addressing them so that consumers can benefit from new options and better services.”

With the AT&T deal generating relatively little public attention, the company has been quietly building its case with regulators behind the scenes.

AT&T CEO Randall Stephenson and DirecTV CEO Michael White, for example, made a visit to the FCC in June while in town for a Senate hearing. The duo and their top lobbyists met individually with Commissioners Mignon Clyburn, Jessica Rosenworcel, Ajit Pai and Mike O’Rielly, touting the public benefits of the merger, according to filings with the commission.

The Comcast and AT&T mega-mergers have their defenders in Washington, too.

“The fears over both deals are exaggerated,” said Randolph May, head of the Free State Foundation, a free-market think tank. “The concerns that are raised are really generated by notions that bigness is per se bad, and while that has some emotional appeal, it’s not the proper analytical framework. The companies that are going to be competing in this marketplace with the investment that’s necessary are going to be big companies.”